Bill Text: TX HB1864 | 2019-2020 | 86th Legislature | Introduced


Bill Title: Relating to the Texas Life and Health Insurance Guaranty Association.

Spectrum: Partisan Bill (Republican 1-0)

Status: (Introduced - Dead) 2019-04-16 - Companion considered in lieu of in committee [HB1864 Detail]

Download: Texas-2019-HB1864-Introduced.html
  86R8958 SMT-F
 
  By: Smithee H.B. No. 1864
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the Texas Life and Health Insurance Guaranty
  Association.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 463.002, Insurance Code, is amended to
  read as follows:
         Sec. 463.002.  PURPOSE. The purpose of this chapter is to
  protect, subject to certain limitations, a person specified by
  Section 463.201 against failure in the performance of a contractual
  obligation under a life, accident, [or] health, [insurance policy]
  or annuity policy, plan, or contract with respect to which this
  chapter provides coverage as determined under Subchapter E, because
  of the impairment or insolvency of the member insurer that issued
  the policy, plan, or contract.
         SECTION 2.  Section 463.003, Insurance Code, is amended by
  amending Subdivisions (4), (7-a), and (9) and adding Subdivisions
  (4-a), (4-b), (5-a), and (6-a) to read as follows:
               (4)  "Covered policy" or "covered contract" means a
  policy or contract, or portion of a policy or contract, including a
  health maintenance organization contract, with respect to which
  this chapter provides coverage as determined under Subchapter E.
               (4-a) "Enrollee" means an individual who is enrolled in
  a health maintenance organization contract with respect to which
  this chapter provides coverage as determined under Subchapter E.  
  For purposes of this chapter, an enrollee is considered to be an
  insured.
               (4-b)  "Health benefit plan" means a hospital and
  medical expense incurred policy or certificate, health maintenance
  organization enrollee contract, or any other similar health
  contract.  The term does not include:
                     (A)  accident-only insurance;
                     (B)  credit insurance;
                     (C)  dental-only insurance;
                     (D)  vision-only insurance;
                     (E)  Medicare supplement insurance;
                     (F)  long-term care coverage or benefits, home
  health care coverage or benefits, community-based care coverage or
  benefits, or any combination of those coverages or benefits;
                     (G)  disability income insurance;
                     (H)  coverage for on-site medical clinics; or
                     (I)  specified disease, hospital confinement
  indemnity, or limited benefit health insurance coverage if the
  types of coverage do not provide coordination of benefits and are
  provided under separate policies or certificates.
               (5-a)  "Insurance" includes health benefit plan
  coverage.
               (6-a)  "Insurer" includes a health maintenance
  organization.
               (7-a)  "Owner" means the owner of a policy or contract
  and "policyholder," "policy owner," and "contract owner" mean the
  person who is identified as the legal owner under the terms of the
  policy or contract or who is otherwise vested with legal title to
  the policy or contract through a valid assignment completed in
  accordance with the terms of the policy or contract and is properly
  recorded as the owner on the books of the member insurer.  The terms
  "owner," "contract owner," "policyholder," and "policy owner" do
  not include persons with a mere beneficial interest in a policy or
  contract.
               (9)  "Premium" means an amount received on a covered
  policy, less any premium, consideration, or deposit returned on the
  policy, and any dividend or experience credit on the policy.  The
  term does not include:
                     (A)  an amount received for a policy or contract
  or part of a policy or contract for which coverage is not provided
  under Section 463.202, except that assessable premiums may not be
  reduced because of:
                           (i)  an interest limitation provided by
  Section 463.203(b)(3); or
                           (ii)  a limitation provided by Section
  463.204 with respect to a single individual, participant,
  annuitant, or policy or contract owner;
                     (B)  premiums in excess of $5 million on an
  unallocated annuity contract not issued under a governmental
  benefit  plan established under Section 401, 403(b), or 457,
  Internal Revenue Code of 1986;
                     (C)  premiums received from the state treasury or
  the United States treasury for insurance for which this state or the
  United States contracts to:
                           (i)  provide welfare benefits to designated
  welfare recipients; or
                           (ii)  implement:
                                 (a)  Title 2, Health and Safety Code;
                                 (b)  Title 2, Human Resources Code; [,]
  or
                                 (c)  the Social Security Act (42 U.S.C.
  Section 301 et seq.); or
                     (D)  premiums in excess of $5 million with respect
  to multiple nongroup policies of life insurance owned by one owner,
  regardless of whether the policy owner is an individual, firm,
  corporation, or other person and regardless of whether the persons
  insured are officers, managers, employees, or other persons,
  regardless of the number of policies or contracts held by the owner.
         SECTION 3.  Subchapter A, Chapter 463, Insurance Code, is
  amended by adding Sections 463.0032 and 463.007 to read as follows:
         Sec. 463.0032.  USE OF TERMS POLICY AND CONTRACT. For
  purposes of this chapter, "policy" and "contract" have the same
  meaning.
         Sec. 463.007.  CONSTRUCTION OF LONG-TERM CARE RIDER. For
  purposes of this chapter, benefits provided by a long-term care
  rider to a life insurance policy or annuity contract are considered
  to be the same type of benefits as the base life insurance policy or
  annuity contract.
         SECTION 4.  Section 463.052, Insurance Code, is amended to
  read as follows:
         Sec. 463.052.  REQUIRED PARTICIPATION IN ASSOCIATION. (a)
  As a condition of engaging in the business of insurance in this
  state, an insurer, including a mutual assessment company, a local
  mutual aid association, a statewide mutual assessment company,
  [and] a stipulated premium company, and a health maintenance
  organization authorized to engage in business in this state, shall
  participate as a member of the association if the insurer holds a
  certificate of authority to engage in a kind of insurance business
  in this state with respect to which this chapter provides coverage
  as determined under Subchapter E.  The requirement to participate
  applies regardless of whether the insurer's certificate of
  authority in this state is suspended, revoked, not renewed, or
  voluntarily withdrawn.
         (b)  The following do not participate as member insurers:
               (1)  [a health maintenance organization;
               [(2)]  a fraternal benefit society;
               (2) [(3)]  a mandatory state pooling plan;
               (3) [(4)]  a reciprocal or interinsurance exchange;
               (4) [(5)]  an organization which has a certificate of
  authority or license limited to the issuance of charitable gift
  annuities, as defined by this code or rules adopted by the
  commissioner; and
               (5) [(6)]  an entity similar to an entity described by
  Subdivision (1), (2), (3), or (4)[, or (5)].
         SECTION 5.  Section 463.053, Insurance Code, is amended by
  adding Subsection (c-1) to read as follows:
         (c-1)  The commissioner shall consider, among other things,
  whether the directors appointed under Subsections (b) and (c)
  fairly represent the member insurers that are health maintenance
  organizations and life, health, and annuity insurers.
         SECTION 6.  Sections 463.059(a), (c), and (f), Insurance
  Code, are amended to read as follows:
         (a)  Notwithstanding Chapter 551, Government Code, or any
  other law, the board or a committee of the board may meet by
  telephone conference call, videoconference, or other similar
  telecommunication method [if immediate action is required and
  convening a quorum of the board or committee of the board at a
  single location is not reasonable or practical.   A board or
  committee member who is unable to attend a meeting in person and who
  is participating in a board or committee meeting by telephone
  conference call, videoconference, or other similar
  telecommunication method may be counted to establish a quorum and
  may vote].  The board may use telephone conference call,
  videoconference, or other similar telecommunication method for
  establishing a quorum, voting, or any other meeting purpose in
  accordance with this section regardless of the subject matter
  discussed or considered by the board at the meeting.
         (c)  The notice of a meeting authorized by this section must
  specify [that] the location of the meeting [is the location at which
  meetings of the board and committees of the board are usually held].
         (f)  An audio or digital recording of a meeting authorized by
  this section must be made in accordance with the association's
  bylaws.  The recording of the open portion of the meeting must be
  posted on the association's Internet website [made available to the
  public].
         SECTION 7.  Section 463.101(a), Insurance Code, is amended
  to read as follows:
         (a)  The association may:
               (1)  enter into contracts as necessary or proper to
  carry out this chapter and the purposes of this chapter;
               (2)  sue or be sued, including taking:
                     (A)  necessary or proper legal action to:
                           (i)  recover an unpaid assessment under
  Subchapter D; or
                           (ii)  settle a claim or potential claim
  against the association; or
                     (B)  necessary legal action to avoid payment of an
  improper claim;
               (3)  borrow money to effect the purposes of this
  chapter;
               (4)  exercise, for the purposes of this chapter and to
  the extent approved by the commissioner, the powers of a domestic
  life, accident, or health insurance company, a health maintenance
  organization, or a group hospital service corporation, except that
  the association may not issue an insurance policy or annuity
  contract other than to perform the association's obligations under
  this chapter;
               (5)  unless prohibited by other law, implement or file
  for an actuarially justified rate or premium increase in accordance
  with the terms and conditions of a covered policy or contract;
               (6)  to further the association's purposes, exercise
  the association's powers, and perform the association's duties,
  join an organization of one or more state associations that have
  similar purposes;
               (7) [(6)]  request information from a person seeking
  coverage from the association in determining its obligations under
  this chapter with respect to the person, and the person shall
  promptly comply with the request; and
               (8) [(7)]  take any other necessary or appropriate
  action to discharge the association's duties and obligations under
  this chapter or to exercise the association's powers under this
  chapter.
         SECTION 8.  Section 463.102(b), Insurance Code, is amended
  to read as follows:
         (b)  The association may amend the plan of operation.  An
  amendment must be approved by the commissioner and takes effect on:
               (1)  the date the commissioner approves the amendment;
  or
               (2)  the 60th [30th] day after the date the amendment is
  submitted to the commissioner for approval, if the commissioner
  does not approve or disapprove the amendment before the 60th [30th]
  day.
         SECTION 9.  Section 463.109, Insurance Code, is amended to
  read as follows:
         Sec. 463.109.  ASSOCIATION APPEARANCE BEFORE COURT;
  INTERVENTION. (a) The association may appear before a court in
  this state with jurisdiction over an impaired or insolvent insurer
  concerning which the association is or may become obligated under
  this chapter.  The association's right to appear applies to:
               (1)  a proposal for reinsuring, reissuing, modifying,
  or guaranteeing the insurer's policies or contracts;
               (2)  the determination of the insurer's policies or
  contracts and contractual obligations; and
               (3)  any other matter germane to the association's
  powers and duties.
         (b)  The association may appear or intervene before a court
  in another state with jurisdiction over:
               (1)  an impaired or insolvent insurer concerning which
  the association is or may become obligated; or
               (2)  a third party against whom the association may
  have rights through subrogation of the insurer's policyholders or
  enrollees.
         SECTION 10.  Sections 463.114(c), (d), and (e), Insurance
  Code, are amended to read as follows:
         (c)  At the expiration of the 60th day after approval of the
  document, a member [an] insurer may not deliver a policy or contract
  with respect to which this chapter provides coverage as determined
  under Subchapter E to a policy, [or] contract, or certificate
  holder or enrollee before a copy of the summary document is
  delivered to the policy, [or] contract, or certificate holder or
  enrollee.  The document must also be available on request of a
  policy, contract, or certificate holder or enrollee
  [policyholder].
         (d)  The distribution, delivery, content, or interpretation
  of a summary document does not guarantee that a policy or contract
  or a policy, [or] contract, or certificate holder or enrollee is
  provided coverage by this chapter if a member insurer becomes
  impaired or insolvent.  Failure to receive the document does not
  give an insured or policy, contract, or certificate holder or
  enrollee any rights greater than those provided by this chapter.
         (e)  An insurer or agent may not deliver a policy or contract
  described by Section 463.202 that is excluded from the coverage
  provided by this chapter by Section 463.203 unless the insurer or
  agent, either before or in conjunction with delivery, gives the
  policy, [or] contract, or certificate holder or enrollee a separate
  written notice clearly and conspicuously disclosing that the policy
  or contract is not covered by the association.
         SECTION 11.  Section 463.153, Insurance Code, is amended by
  amending Subsections (b) and (c) and adding Subsection (b-1) to
  read as follows:
         (b)  Class B assessments on [against] a member insurer for
  each account under Section 463.105 shall be authorized and called
  in the proportion that the premiums received on business in this
  state by the member insurer on policies or contracts covered by each
  account for the three most recent calendar years for which
  information is available preceding the year in which the impaired
  or insolvent member insurer became impaired or insolvent bear to
  premiums received on business in this state for those calendar
  years by all assessed member insurers.  Except for assessments
  related to long-term care insurance as described by Subsection
  (b-1), the [The] amount of a Class B assessment shall be allocated
  among the separate accounts in accordance with an allocation
  formula that may be based on:
               (1)  the premiums or reserves of the impaired or
  insolvent insurer; or
               (2)  any other standard deemed by the board in the
  board's sole discretion as being fair and reasonable under the
  circumstances.
         (b-1)  The amount of a Class B assessment for long-term care
  insurance written by an impaired or insolvent member insurer shall
  be allocated according to a methodology included in the plan of
  operation and approved by the commissioner. The methodology must
  provide for 50 percent of the assessment to be allocated to accident
  and health member insurers and 50 percent to be allocated to life
  and annuity member insurers. This subsection does not apply to a
  rider to a member insurer's life insurance policy or annuity
  contract that provides long-term care benefits.
         (c)  The total amount of assessments on a member insurer for
  each account under Section 463.105 may not in one calendar year
  exceed two percent of the insurer's average annual premiums on the
  policies covered by the account during the three calendar years
  preceding the year in which the impaired or insolvent member
  insurer became an impaired or insolvent insurer.  If two or more
  assessments are authorized in a calendar year with respect to
  member insurers that become impaired or insolvent in different
  calendar years, the average annual premiums for purposes of the
  aggregate assessment percentage limitation described by this
  subsection shall be equal to the higher of the three-year average
  annual premiums for the applicable subaccount or account as
  computed in accordance with this section.  If the maximum
  assessment and the other assets of the association do not provide in
  a year an amount sufficient to carry out the association's
  responsibilities, the association shall make necessary additional
  assessments as soon as this chapter permits.
         SECTION 12.  Sections 463.154 and 463.201, Insurance Code,
  are amended to read as follows:
         Sec. 463.154.  DEFERMENT. The association may wholly or
  partly defer an assessment on [of] a member insurer if the
  association believes payment of the assessment would endanger the
  ability of the insurer to fulfill the insurer's contractual
  obligations.  The amount of the assessment that is deferred may be
  assessed against the other member insurers in a manner consistent
  with this subchapter.
         Sec. 463.201.  PERSONS [INSUREDS] COVERED. (a) Subject to
  Subsections (b) and (c), this chapter provides coverage for a
  policy or contract described by Section 463.202 to a person who is:
               (1)  a person, other than a certificate holder under a
  group policy or contract who is not a resident, who is a
  beneficiary, assignee, or payee, including a health care provider
  who renders services covered under a health insurance policy or
  certificate, of a person described by Subdivision (2);
               (2)  a person who is an owner of or certificate holder
  or enrollee under a policy or contract specified by Section
  463.202, other than an unallocated annuity contract or structured
  settlement annuity, and who is:
                     (A)  a resident; or
                     (B)  not a resident, but only under all of the
  following conditions:
                           (i)  the member insurers that issued the
  policies or contracts are domiciled in this state;
                           (ii)  the state in which the person resides
  has an association similar to the association; and
                           (iii)  the person is not eligible for
  coverage by an association in any other state because the insurer or
  health maintenance organization was not licensed in the state at
  the time specified in that state's guaranty association law;
               (3)  a person who is the owner of an unallocated annuity
  contract issued to or in connection with:
                     (A)  a benefit plan whose plan sponsor has the
  sponsor's principal place of business in this state; or
                     (B)  a government lottery, if the owner is a
  resident; or
               (4)  a person who is the payee under a structured
  settlement annuity, or beneficiary of the payee if the payee is
  deceased, if:
                     (A)  the payee is a resident, regardless of where
  the contract owner resides;
                     (B)  the payee is not a resident, the contract
  owner of the structured settlement annuity is a resident, and the
  payee is not eligible for coverage by the association in the state
  in which the payee resides; or
                     (C)  the payee and the contract owner are not
  residents, the insurer that issued the structured settlement
  annuity is domiciled in this state, the state in which the contract
  owner resides has an association similar to the association, and
  neither the payee or, if applicable, the payee's beneficiary, nor
  the contract owner is eligible for coverage by the association in
  the state in which the payee or contract owner resides.
         (b)  This chapter does not provide coverage to:
               (1)  a person who is a payee or the beneficiary of a
  payee with respect to a contract the owner of which is a resident of
  this state, if the payee or the payee's beneficiary is afforded any
  coverage by the association of another state; [or]
               (2)  a person otherwise described by Subsection (a)(3),
  if any coverage is provided by the association of another state to
  that person; or
               (3)  a person who acquires rights to receive payments
  through a structured settlement factoring transaction as defined by
  Section 5891(c)(3)(A), Internal Revenue Code of 1986 (26 U.S.C.
  Section 5891(c)(3)(A)), regardless of whether the transaction
  occurred before, on, or after the date that section became
  effective.
         (c)  This chapter is intended to provide coverage to persons
  who are residents of this state, and in those limited circumstances
  as described in this chapter, to nonresidents.  In order to avoid
  duplicate coverage, if a person who would otherwise receive
  coverage under this chapter is provided coverage under the laws of
  any other state, the person may not be provided coverage under this
  chapter.  In determining the application of the provisions of this
  subsection in situations in which a person could be covered by the
  association of more than one state, whether as an owner, payee,
  enrollee, beneficiary, or assignee, this chapter shall be construed
  in conjunction with other state laws to result in coverage by only
  one association.
         SECTION 13.  Section 463.202(a), Insurance Code, is amended
  to read as follows:
         (a)  Except as limited by this chapter, the coverage provided
  by this chapter to a person specified by Section 463.201, subject to
  Sections 463.201(b) and (c), applies with respect to the following
  policies and contracts issued by a member insurer:
               (1)  a direct, nongroup life, health, accident,
  annuity, or supplemental policy or contract, including a health
  maintenance organization contract or certificate;
               (2)  a certificate under a direct group policy or
  contract;
               (3)  a group hospital service contract; and
               (4)  an unallocated annuity contract.
         SECTION 14.  Section 463.203, Insurance Code, is amended by
  amending Subsection (b) and adding Subsection (b-1) to read as
  follows:
         (b)  This chapter does not provide coverage for:
               (1)  any part of a policy or contract not guaranteed by
  the insurer or under which the risk is borne by the policy or
  contract owner;
               (2)  a policy or contract of reinsurance, unless an
  assumption certificate has been issued;
               (3)  any part of a policy or contract to the extent that
  the rate of interest on which that part is based:
                     (A)  as averaged over the period of four years
  before the date the member insurer becomes impaired or insolvent
  under this chapter, whichever is earlier, exceeds a rate of
  interest determined by subtracting two percentage points from
  Moody's Corporate Bond Yield Average averaged for the same
  four-year period or for a lesser period if the policy or contract
  was issued less than four years before the date the member insurer
  becomes impaired or insolvent under this chapter, whichever is
  earlier; and
                     (B)  on and after the date the member insurer
  becomes impaired or insolvent under this chapter, whichever is
  earlier, exceeds the rate of interest determined by subtracting
  three percentage points from Moody's Corporate Bond Yield Average
  as most recently available;
               (4)  a portion of a policy or contract issued to a plan
  or program of an employer, association, similar entity, or other
  person to provide life, health, or annuity benefits to the entity's
  employees, members, or others, to the extent that the plan or
  program is self-funded or uninsured, including benefits payable by
  an employer, association, or similar entity under:
                     (A)  a multiple employer welfare arrangement as
  defined by Section 3, Employee Retirement Income Security Act of
  1974 (29 U.S.C. Section 1002);
                     (B)  a minimum premium group insurance plan;
                     (C)  a stop-loss group insurance plan; or
                     (D)  an administrative services-only contract;
               (5)  any part of a policy or contract to the extent that
  the part provides dividends, experience rating credits, or voting
  rights, or provides that fees or allowances be paid to any person,
  including the policy or contract owner, in connection with the
  service to or administration of the policy or contract;
               (6)  a policy or contract issued in this state by a
  member insurer at a time the insurer was not authorized to issue the
  policy or contract in this state;
               (7)  an unallocated annuity contract issued to or in
  connection with a benefit plan protected under the federal Pension
  Benefit Guaranty Corporation, regardless of whether the Pension
  Benefit Guaranty Corporation has not yet become liable to make any
  payments with respect to the benefit plan;
               (8)  any part of an unallocated annuity contract that
  is not issued to or in connection with a specific employee, a
  benefit plan for a union or association of individuals, or a
  governmental lottery;
               (9)  any part of a financial guarantee, funding
  agreement, or guaranteed investment contract that:
                     (A)  does not contain a mortality guarantee; and
                     (B)  is not issued to or in connection with a
  specific employee, a benefit plan, or a governmental lottery;
               (10)  a part of a policy or contract to the extent that
  the assessments required by Subchapter D with respect to the policy
  or contract are preempted by federal or state law;
               (11)  a contractual agreement that established the
  member insurer's obligations to provide a book value accounting
  guaranty for defined contribution benefit plan participants by
  reference to a portfolio of assets that is owned by the benefit plan
  or the plan's trustee in a case in which neither the benefit plan
  sponsor nor its trustee is an affiliate of the member insurer;
               (12)  a part of a policy or contract to the extent the
  policy or contract provides for interest or other changes in value
  that are to be determined by the use of an index or external
  reference stated in the policy or contract, but that have not been
  credited to the policy or contract, or as to which the policy or
  contract owner's rights are subject to forfeiture, as of the date
  the member insurer becomes an impaired or insolvent insurer under
  this chapter, whichever date is earlier, subject to Subsection (c);
  [or]
               (13)  a policy or contract providing a hospital,
  medical, prescription drug, or other health care benefit under 42
  U.S.C. Sections 1395w-21 et seq. and 1395w-101 et seq. (Medicare
  Parts C and D), 42 U.S.C. Sections 1396-1396w-5 (Medicaid), or 42
  U.S.C. Sections 1397aa-1397mm (State Children's Health Insurance
  Program) or a regulation adopted under those federal statutes; or
               (14)  structured settlement annuity benefits to which a
  payee or beneficiary has transferred the payee's or beneficiary's
  rights in a structured settlement factoring transaction as defined
  by Section 5891(c)(3)(A), Internal Revenue Code of 1986 (26 U.S.C.
  Section 5891(c)(3)(A)), regardless of whether the factoring
  transaction occurred before, on, or after the date that section
  became effective.
         (b-1)  The exclusion from coverage described by Subsection
  (b)(3) does not apply to any portion of a policy or contract,
  including a rider, that provides long-term care benefits or any
  other health insurance benefit.
         SECTION 15.  Section 463.204, Insurance Code, is amended to
  read as follows:
         Sec. 463.204.  OBLIGATIONS EXCLUDED.  A contractual
  obligation does not include:
               (1)  death benefits in an amount in excess of $300,000
  or a net cash surrender or net cash withdrawal value in an amount in
  excess of $100,000 under one or more life insurance policies on a
  single life;
               (2)  an amount in excess of:
                     (A)  $250,000 in the present value under one or
  more annuity contracts issued with respect to a single life under
  individual annuity policies or group annuity policies; or
                     (B)  $5 million in unallocated annuity contract
  benefits with respect to a single contract owner regardless of the
  number of those contracts;
               (3)  an amount in excess of the following amounts,
  including any net cash surrender or cash withdrawal values, under
  one or more accident, health, accident and health, or long-term
  care insurance policies on a single life:
                     (A)  $500,000 for health benefit plans [basic
  hospital, medical-surgical, or major medical insurance, as those
  terms are defined by this code or rules adopted by the
  commissioner];
                     (B)  $300,000 for disability income and long-term
  care insurance, as those terms are defined by this code or rules
  adopted by the commissioner; or
                     (C)  $200,000 for coverages that are not defined
  as health benefit plans [basic hospital, medical-surgical, major
  medical], disability income, or long-term care insurance;
               (4)  an amount in excess of $250,000 in present value
  annuity benefits, in the aggregate, including any net cash
  surrender and net cash withdrawal values, with respect to each
  individual participating in a governmental retirement benefit plan
  established under Section 401, 403(b), or 457, Internal Revenue
  Code of 1986 (26 U.S.C. Sections 401, 403(b), and 457), covered by
  an unallocated annuity contract or the beneficiary or beneficiaries
  of the individual if the individual is deceased;
               (5)  an amount in excess of $250,000 in present value
  annuity benefits, in the aggregate, including any net cash
  surrender and net cash withdrawal values, with respect to each
  payee of a structured settlement annuity or the beneficiary or
  beneficiaries of the payee if the payee is deceased;
               (6)  aggregate benefits in an amount in excess of
  $300,000 with respect to a single life, except with respect to:
                     (A)  benefits paid under health benefit plans
  [basic hospital, medical-surgical, or major medical insurance
  policies], described by Subdivision (3)(A), in which case the
  aggregate benefits are $500,000; and
                     (B)  benefits paid to one owner of multiple
  nongroup policies of life insurance, whether the policy owner is an
  individual, firm, corporation, or other person, and whether the
  persons insured are officers, managers, employees, or other
  persons, in which case the maximum benefits are $5 million
  regardless of the number of policies and contracts held by the
  owner;
               (7)  an amount in excess of $5 million in benefits, with
  respect to either one plan sponsor whose plans own directly or in
  trust one or more unallocated annuity contracts not included in
  Subdivision (4) irrespective of the number of contracts with
  respect to the contract owner or plan sponsor or one contract owner
  provided coverage under Section 463.201(a)(3)(B), except that, if
  one or more unallocated annuity contracts are covered contracts
  under this chapter and are owned by a trust or other entity for the
  benefit of two or more plan sponsors, coverage shall be afforded by
  the association if the largest interest in the trust or entity
  owning the contract or contracts is held by a plan sponsor whose
  principal place of business is in this state, and in no event shall
  the association be obligated to cover more than $5 million in
  benefits with respect to all these unallocated contracts;
               (8)  any contractual obligations of the insolvent or
  impaired insurer under a covered policy or contract that do not
  materially affect the economic value of economic benefits of the
  covered policy or contract; or
               (9)  punitive, exemplary, extracontractual, or bad
  faith damages, regardless of whether the damages are:
                     (A)  agreed to or assumed by an insurer, [or]
  insured, or covered person; or
                     (B)  imposed by a court.
         SECTION 16.  Section 463.251(b), Insurance Code, is amended
  to read as follows:
         (b)  With the commissioner's approval, the association may:
               (1)  guarantee, assume, reissue, or reinsure, or cause
  to be guaranteed, assumed, reissued, or reinsured, one or more of
  the insurer's policies or contracts;
               (2)  provide money, pledges, notes, guarantees, or
  other means proper to:
                     (A)  implement Subdivision (1); and
                     (B)  ensure payment of the insurer's contractual
  obligations until action is taken under Subdivision (1); or
               (3)  loan money to the insurer.
         SECTION 17.  Section 463.252(c), Insurance Code, is amended
  to read as follows:
         (c)  A policy or contract owner, certificate holder, or
  enrollee who claims emergency or hardship may petition for
  substitute benefits under standards the association proposes and
  the commissioner approves.  Substitute benefits are available only
  for a health claim, periodic annuity benefit payment, death
  benefit, supplemental benefit, or cash withdrawal.
         SECTION 18.  Section 463.253(b), Insurance Code, is amended
  to read as follows:
         (b)  The association shall provide money, pledges,
  guarantees, or other means reasonably necessary to discharge the
  insurer's duties and to:
               (1)  guarantee, assume, reissue, or reinsure, or cause
  to be guaranteed, assumed, reissued, or reinsured, the insurer's
  policies or contracts; or
               (2)  ensure payment of the insurer's contractual
  obligations.
         SECTION 19.  Sections 463.254(b), (e), (f), (g), (h), and
  (i), Insurance Code, are amended to read as follows:
         (b)  The association, in accordance with Subsections (c) and
  (d), as applicable, shall ensure payment of benefits identical to
  the benefits that would have been payable under the policy or
  contract of the insurer[, at premiums identical to the premiums
  that would have been applicable under that policy or contract,
  except for terms of conversion and renewability].
         (e)  The association shall diligently attempt to provide
  each known insured, enrollee, or group policy or contract holder
  [policyholder] with notice before the 30th day before the date the
  benefits are terminated.
         (f)  As provided by Subsections (g)-(i), the association
  shall make substitute coverage available on an individual basis to:
               (1)  each known insured or enrollee under an individual
  policy, or the owner if other than the insured or enrollee; and
               (2)  each individual who:
                     (A)  was formerly insured or enrolled under a
  group policy or contract; and
                     (B)  is not eligible for replacement group
  coverage.
         (g)  Substitute coverage is available for an individual
  policy under Subsection (f) only if the insured, enrollee, or owner
  was entitled under law or the terminated policy to continue an
  individual policy in force until a specified age or for a specified
  period during which the insurer:
               (1)  was not entitled to unilaterally change a
  provision of the policy; or
               (2)  was entitled only to change a premium by class.
         (h)  Substitute coverage is available for a group policy or
  contract under Subsection (f) only if the formerly insured or
  enrolled individual was entitled under law or the terminated policy
  or contract to convert group coverage to individual coverage.
         (i)  To provide substitute coverage under Subsection (f),
  the association may offer to reissue the terminated coverage or
  issue an alternative policy.  The association shall offer the
  reissued or alternative policy without requiring evidence of
  insurability, at actuarially justified rates.  The reissued or
  alternative policy may not provide for a waiting period or
  exclusion that would not have applied under the terminated
  policy.  The association may reinsure a reissued or alternative
  policy.
         SECTION 20.  Section 463.256(b), Insurance Code, is amended
  to read as follows:
         (b)  The association shall set the premium according to a
  table of rates the association adopts.  The premium:
               (1)  must reflect:
                     (A)  the amount of insurance provided; and
                     (B)  each insured's or enrollee's age and class of
  risk; and
               (2)  may not reflect any change in an insured's or
  enrollee's health occurring after the original policy was most
  recently underwritten.
         SECTION 21.  Section 463.258, Insurance Code, is amended to
  read as follows:
         Sec. 463.258.  PREMIUM FOR REISSUANCE OF TERMINATED
  COVERAGE. If the association reissues terminated coverage at a
  premium different from the terminated policy's premium, the premium
  must:
               (1)  reflect the amount of insurance provided and the
  insured's or enrollee's age and class of risk; and
               (2)  be approved by the commissioner or a court.
         SECTION 22.  Section 463.260(b), Insurance Code, is amended
  to read as follows:
         (b)  The association's obligations with respect to coverage
  under a policy of an impaired or insolvent insurer or under a
  reissued or alternative policy terminate on the date the coverage
  or policy is replaced by another similar policy by the
  policyholder, the contract owner, the insured, the enrollee, or the
  association.
         SECTION 23.  Sections 463.261(a) and (c), Insurance Code,
  are amended to read as follows:
         (a)  A person receiving a benefit under this chapter,
  including a payment of or on account of a contractual obligation,
  continuation of coverage, or provision of substitute or alternative
  coverage, is considered to have assigned to the association the
  rights under, and any cause of action relating to, the covered
  policy to the extent of the benefit received.  The association may
  require a payee, policy or contract owner, beneficiary, insured,
  enrollee, or annuitant to assign the person's rights and cause of
  action to the association as a condition of receiving a right or
  benefit under this chapter.
         (c)  The association has all common law rights of subrogation
  and any other equitable or legal remedy that would have been
  available to the impaired or insolvent insurer or holder,
  beneficiary, enrollee, or payee of a policy or contract with
  respect to the policy or contract.
         SECTION 24.  Section 463.304, Insurance Code, is amended to
  read as follows:
         Sec. 463.304.  DISTRIBUTION OF OWNERSHIP RIGHTS OF IMPAIRED
  OR INSOLVENT INSURER. In making an equitable distribution of the
  ownership rights of an impaired or insolvent insurer before the
  termination of a receivership, the court:
               (1)  shall consider the welfare of the policyholders,
  contract owners, certificate holders, and enrollees of the
  continuing or successor insurer; and
               (2)  may consider the contributions of the respective
  parties, including the association, the shareholders, [and]
  policyholders, contract owners, certificate holders, and enrollees
  of the impaired or insolvent insurer, and any other party with a
  bona fide interest.
         SECTION 25.  Section 463.351(a), Insurance Code, is amended
  to read as follows:
         (a)  The commissioner shall:
               (1)  notify the insurance officials of all the other
  states, territories of the United States, and the District of
  Columbia by mail not later than the 30th day after the date the
  commissioner:
                     (A)  revokes or suspends a member insurer's
  certificate of authority; or
                     (B)  issues a formal order requiring a member
  insurer to:
                           (i)  restrict the insurer's premium writing;
                           (ii)  withdraw from this state;
                           (iii)  reinsure all or part of the insurer's
  business;
                           (iv)  obtain additional contributions to
  surplus; or
                           (v)  increase capital, surplus, or another
  account for the security of policyholders, contract owners, or
  creditors;
               (2)  report to the board when the commissioner:
                     (A)  takes an action described by Subdivision (1)
  or receives from another insurance official a report indicating
  that a similar action has been taken in another state; or
                     (B)  has reasonable cause to believe from a
  completed or continuing examination that a member insurer may be
  impaired or insolvent; and
               (3)  provide to the board the National Association of
  Insurance Commissioners Insurance Regulatory Information System
  ratios and listings of insurers not included in those ratios.
         SECTION 26.  The changes in law made by this Act apply only
  to an insurer that first becomes impaired or insolvent on or after
  the effective date of this Act.
         SECTION 27.  This Act takes effect September 1, 2019.
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